Question

Use this information to answer questions 1 and 2 In June 1 2018, Max borrowed $50,000 on a 12 month 15% bearing note payable. The interest is payable on maturity of the note. Max Corp has a balance date of 31 March 1. On March 31st Max will (a) Debit Interest Expense $7500 Credit Accrued Interest $7500 (b) Debit Interest Expense $6250 Credit Accrued Interest $6250 (c) Debit Accrued Interest $7500 Credit Interest Expense $7500 (d) Debit Accrued Interest $6250 Credit Interest Expense $6250 2. Assuming no reversing entries were made, on May 31st Max will enter which journal (a) Accrued Interest 7,500 Loan 50,000 Bank 57,500 (b) Interest 7,500 Accrued Interest 7,500 Loan 50,000 Bank 50,000 (c) Interest 7,500 Loan 50,000 Bank 57,500 (d) Interest 1,250 Accrued Interest 6,250 Loan 50,000 Bank 57,500

Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. $ 6,250.00 6,250.00 Mar.31 JInterest Expense ($50000x15%x10months/12months) Accrued Interest (To record accrued interest expense) Option b is Correct Answer May.1 1,250.00 6,250.00 50,000.00 Interest Expense ($50000x15%x2/12) Accrued Interest Loan Bank (To record Payment of due along with interest) Option d is Correct Answer 57,500.00